Validity of Quitclaims and Waivers in Philippine Labor Law

In labor law, a quitclaim or waiver is a document signed by an employee relinquishing any further claims against the employer, typically in exchange for a monetary settlement. Although these instruments are common in employment termination scenarios, they are not automatically valid or enforceable. Courts scrutinize them closely to ensure that they were executed voluntarily, without coercion, and with full understanding of their legal consequences.

Legal Requisites for Valid Quitclaims

The Supreme Court has consistently held that for a quitclaim to be valid, the following elements must be present:

1. Voluntary execution by the employee;
2. Absence of fraud or deceit;
   3. Credible and reasonable consideration;
   4. Compliance with law and public policy, and no prejudice to third-party rights.

In F.F. Cruz & Co Inc. vs. Galandez, G.R. No. 236496, 08 July 2019, it was ruled:

“For a deed of release, waiver, and quitclaim to be valid, it must be shown that: (a) there was no fraud or deceit on the part of any parties; (b) that the consideration for the quitclaim is credible and reasonable; and (c) that the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law.⁶¹ The burden rests on the employer to prove that the quitclaim constitutes a credible and reasonable settlement of what an employee is entitled to recover, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.”

If properly done, waivers are respected as law between the parties and cannot be disregarded. Thus, in Coats Manila Bay, Inc. vs. Ortega, G.R. No. 172628, 13 February 2009, it was held:

“Indeed, there are legitimate waivers that represent a voluntary and reasonable settlement of laborers’ claims which should be respected by the Court as the law between the parties. Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking, and may not later be disowned simply because of a change of mind.”

“Dire necessity” is not an acceptable ground for annulling the release, when it is not shown that the employee has been forced to execute it [Magsalin vs. National Organization of Working Men, G.R. No. 148942, 09 May 2003].

Employer’s Burden of Proof

The employer bears the burden of proving that the quitclaim was executed by the employee freely and with full knowledge of its implications. In Sy vs. Neat, Inc., G.R. No. 213748, 27 November 2017, the Court held that while quitclaims are, at times, considered as valid and binding compromise agreements, the rule is settled that the burden rests on the employer to prove that the quitclaim constitutes a credible and reasonable settlement of what an employee is entitled to recover, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.

Contents of a Valid Quitclaim

In Edi-Staffbuilders International Inc. v. NLRC, G.R. No. 145587, 26 October 2007, the Supreme Court laid down the basic contents of a valid and effective quitclaim, to wit:

1. A fixed amountas full and final compromise settlement;
2. The benefitsof the employees if possible with the corresponding amounts, which the employees are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or in the dialect known to the employees– that by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and had fully understood the contents of the document and that their consent was freely givenwithout any threat, violence, duress, intimidation, or undue influence exerted on their person.

Quitclaims and waivers, while legally permissible, are subject to strict scrutiny. Employers must ensure that such documents are executed with transparency, fairness, and informed consent. While such documents may signify the end of an employment relationship, they are generally viewed with skepticism by the courts due to the inherent imbalance of power between employer and employee. Courts scrutinize them closely to ensure that they were executed voluntarily, without coercion, and with full understanding of their legal consequences.

About Nicolas and De Vega Law Offices

Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.